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Relative - Section 2(77) of the Companies Act, 2013

Amol Gopal Kabra (CA,CS,DISA) 
Updated on 30 November 2020

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In the earlier article, I have discussed the ‘related party’ as per section 2(76) of the Companies Act, 2013. In that definition, we have come across the word ‘relative’ a number of times. As such the word is vague. However, the word relative is defined under section 2(77) of the Companies Act, 2013 read with rule 4 of the Companies (Specification of definitions details) Rules, 2014. Let us understand the meaning of relative as defined in the Act and Rules.

Section 2(77) of the Companies Act, 2013 defines the word relative as below.

“relative”, with reference to any person, means any one who is related to another, if –

  1. they are members of a Hindu Undivided Family;
  2. they are husband and wife; or
  3. on person is related to the other in such manner as may be prescribed.

Rule 4 of the Companies (Specification of definitions details) Rules, 2014 reads as follows

List of relatives in terms of clause (77) of section 2.-

A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:-

1. Father:

Provided that the term “Father” includes step-father.

2. Mother:

Provided that the term “Mother” includes step-mother.

3. Son:

Provided that the term “Son” includes step-son.

4. Son’s Wife.

5. Daughter.

6. Daughter’s husband.

7. Brother:

Provided that the term “Brother” includes step-brother.

8. Sister:

Provided that the term “Sister” includes step-sister.

The list given as above is very crystal clear. However, following needs to be understood.

Father, mother, son, brother and sister include the step-counterparts but there is no specific mention about step-daughter. It may be a drafting mistake or may be an intentional exclusion. Whatever it may be, but the plain interpretation of the section indicates that step daughter is not a relative.

We get one more surprising thing here. In one case, a person can be relative of another in one way, but the reverse way, the person is not a relative. For example, Mr. A has a step daughter Ms. B. So for Ms. B, Mr. A, being a step-father, is a relative. However, for Mr. A, Ms. B is not a relative as step-daughter is not a relative.

It is worth considering that son’s wife includes step son’s wife. However, daughter’s husband does not include step daughter’s husband.

On division of a Hindu Undivided Family, the members of the family, except included in the above list of relatives, cease to be relatives.

Also, if we compare with Companies Act, 1956, the list of relatives is drastically cut short. The following table will show the comparison of respective acts.

Sr. No.

Relative

1956 Act

2013 Act

1

Members of HUF

Yes

Yes

2

Husband

Yes

Yes

3

Wife

Yes

Yes

4

Father

Yes

Yes

5

Step Father

No

Yes

6

Mother

Yes

Yes

7

Step Mother

Yes

Yes

8

Son

Yes

Yes

9

Step Son

Yes

Yes

10

Son’s Wife

Yes

Yes

11

Daughter

Yes

Yes

12

Step Daughter

Yes

No

13

Daughter’s Husband

Yes

Yes

14

Brother

Yes

Yes

15

Step Brother

Yes

Yes

16

Sister

Yes

Yes

17

Step Sister

Yes

Yes

18

Father’s Father

Yes

No

19

Father’s Mother

Yes

No

20

Mother’s Mother

Yes

No

21

Mother’s Father

Yes

No

22

Son’s Son

Yes

No

23

Son’s Son’s Wife

Yes

No

24

Son’s Daughter

Yes

No

25

Sons’ Daughter’s Husband

Yes

No

26

Daughter’s Son

Yes

No

27

Daughter’s Son’s Wife

Yes

No

28

Daughter’s Daughter

Yes

No

29

Daughter’s Daughter’s Husband

Yes

No

30

Brother’s Wife

Yes

No

31

Sister’s Husband

Yes

No

To conclude on a lighter note, the Companies Act, 1956 considered the joint family size concept, whereas, the Companies Act, 2013 as taken into account the modern family size, i.e. the nuclear family and has reduced the list of relatives from the long list to a small list.

CA Amol G. Kabra

Author of ‘MyCorporate.in’ Blog

To know more about what the term 'Relative' means, as per the Income Tax Act, 1961 click here


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